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CVM Overview
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Customer Value Management is based on customer trade offs between what they get and how much they pay, organised around customer facing processes and linked to internal business processes so pragmatic changes can be implemented
Customer Value Management
(CVM)Products & Services
Prices & Costs
Customer process
Customer process
Customer process
Customer process
Customer process
Les Mills process
Les Mills process
Les Mills process
Les Mills process
Les Mills process
Les Mills process
Les Mills business processesCustomer view
Image & Reputation
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The link with business processes is vital as these processes are the levers that managers can use to change customer perceptions of value and ultimately impact EBIT
HR
Operations
Finance
Sales and Marketing
Customer Service
• Recruiting, retaining and training the right people
• Training
• Billing
• Communicating the value proposition of the Les Mills programmes effectively
• Providing the required level of service to the customers
e.g. Initiative: Improve Programme
Quality
EBIT Impact
Business processes…(across LMI and its agents)
…influence customer perceptions of Les Mills performance… …which are modelled…
…to provide clarity as to where Les Mills can focus its business improvement efforts and quantify what's at stake…
Direct Financial Impact
• Cost of project• Revenue gain
Indirect Financial Impact
• Impact on customer perceptions which impacts share of wallet
Customer Value Management
(CVM)Products & Services
Prices & Costs
Customer process
Customer process
Customer process
Customer process
Customer process
Les Mills process
Les Millsprocess
Les Millsprocess
Les Millsprocess
Les Millsprocess
Les Millsprocess
Les Millsbusiness processesCustomer view
Image & Reputation
Customer Value Management
(CVM)Products & Services
Prices & Costs
Customer process
Customer process
Customer process
Customer process
Customer process
Customer process
Customer process
Customer process
Les Mills process
Les Millsprocess
Les Millsprocess
Les Millsprocess
Les Millsprocess
Les Millsprocess
Les Millsbusiness processesCustomer view
Image & Reputation
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We also know that what is important to customers can vary across their lifecycle so we also measure the key decision criteria customers use when deciding to spend on Les Mills programmes
Performance on Key Decision Criteria
determine likelihood to spend with Les
Mills
High
Low
New Relationship
Trigger Point Trigger Point
Customer perceptions (as shown by CVM)
determine likelihood to change spend levels
Time
Illustrative
e.g. Renegotiation of contract, bad service
experience, new entrant in the market
Level of consideration
given to selection / changing
Group Fitness Provider
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A Customer Value Model has three key metrics which each serve a purpose in understanding perceptions of performance
3
2
1
CVM
x.x ±xx
Image and Reputation
xx% x.x ± xx
Prices and Costs
xx% x.x ± xx
Products and Services
xx% x.x ± xx
Absolute performance
1=poor, 10=excellent
Change relative to 2004 survey
Level of impact of driver
0-100%
Impact weights vary by CVM model and by competitor
CVM is a measure of the markets perceptions – as a result CVM scores take
time to move as perceptions lag actions
and therefore slowly change over time
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There are a few things that need to be borne in mind when considering the results of a CVM survey
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• Number of Les Mills programmes• Length of time using Les Mills
programmes• Proportion of timetable devoted to
Les Mills programmes• Number of members within the club• Size of Group Fitness facilities in the
club• Attendance• Internet connections of clubs
Other Business Information
• Likelihood to reduce usage of Les Mills programmes in the next twelve months
• Customer views on who the main competition for Les Mills programmes are in each market
• Customer views on performance of main competition identified
• eClub usefulness• Advanced Instructor Training
usefulness• Scorecard usefulness• BODYPUMP™ weight attributes
Other Business Issues
• The five factors (rated in importance) which the customer considered in buying the Les Mills programmes initially
Key Decision Criteria
In addition to the customer value data, we collected data on key decision criteria, other business issues and information about the customers’ businesses as part of the survey
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Actions that need to be carried out across all
markets e.g. addressing programme quality
issues
Actions that need to be carried out on a market by market basis but are
common across markets e.g. addressing price
issues
Actions that can only be carried out by LMI to address a particular issue in market e.g.
change to programme content to address
individual market issue
Actions that need to be carried out to address
issues particular to individual markets e.g.
addressing billing issuesLocal
Global
LMI Agents
Scope of Action
Implementation of Actions
The purpose of collecting this information is to form action plans to maximise profitability across the lifecycle, which because of the supply chain for Les Mills programmes, are undertaken by either LMI and / or the agent
Les Mills CVM Action Framework
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Response rates from the clubs were good enabling detailed information to be provided for seven markets – Australia, Brazil, France, Germany, the Netherlands, Baltic and U.S.A. – and indicative results for Japan
China 1 response
Brazil88 responses
Spain2 responses
France74 responses
Australia81 responses
Germany 59 responses
The Netherlands 83 responses
Baltic 92 responses
Total Sample = 649
Japan 19 responsesUSA
151 responses
The United States did not participate in the last CVM study and as a result this sample is different to the last study and this will influence the results shown
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USA
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CVM Performance
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The USA is very sensitive to prices and costs, evenly split between financial and non-financial costs, but performance on these drivers outperforms other markets
• Although relatively lower than other measures, Les Mills is rated higher in the USA on both financial and non-financial costs
• Actions on non-financial costs should focus on how the convenience of workshops can be improved
• Actions on financial costs should aim to remove focus on prices and costs and put it on the programs
• Within the US market Les Mills programs have a very strong reputation for being technical and leading edge which should be reinforced through marketing as it is a high impact driver
• People are also important and are perceived as a positive with strong performance particularly for proactive contact, being fair, likeable and credible and respecting the customer as valued
Insights and Implications
USA
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The US is the strongest performing country with all aspects significantly higher than the market average
• Overall perceived value is high at 8.0• The US is price sensitive with two thirds of perceived
value accounted for by prices and costs with relatively high performance at 7.4
• The remainder of perceived value is split between image and reputation and products and services both of which are performing extremely strongly
Insights and Implications
USA
Note: (1) Sample size n = 151
Perceived value ofLes Mills products to
clubs
Image and Reputation
Products and Services
Prices and Costs
Overall CVM Performance(1)
18% 8.8
8.0 19% 8.3
63% 7.4Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
Perceived value of the Les Mills systems to
clubs
Perceived value of the Les Mills system to
clubs
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Brings in and retains customers
Recognised brand
Recognised as effective and safe
Image and reputation is a real strength within the US, especially in having a reputation for technical and leading edge programs which is of particular importance to US clubs
Image and Reputation
Image and Reputation CVM Performance(1)
Fair, likeable and credible people
Technical and leading edge
NCI 8.2
14% 8.1
18% 8.8 NCI 8.7
30% 8.6
56% 8.9
• Of most importance to the customer is that the programs are technical and leading edge and performance on this factor is very high at 8.9
• People are also important and Les Mills is seen as having of reputation for fair, likeable and credible people
Insights and Implications
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Using the programs
Getting set up and going
Using the services
Products and services generally perform very highly, especially the actual programs themselves
Products and Services
Product and Services CVM Performance(1)
Account management
Billing
• Overall products and services rated highly at 8.3• Only a very small portion of US customers’ overall
perceptions of value are shaped by their views in respect of products and services
• In general Les Mills performs well on these factors within the US market
• Although it is a longer term strategy, within USA Les Mills should look to move the focus away from price and cost to products and services through concentrating marketing and promotion efforts on the quality and effectiveness of the Les Mills system
Insights and Implications
NCI 8.1
18% 8.6
19% 8.3 27% 7.5
30% 8.1
26% 8.4
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Providing me with programs that suit my needs
Providing me with training and education on programs
Agreeing a fair and reasonable contract
Getting set up and going
Getting Set Up and Going CVM Performance(1)
Assisting me with launching my programs
The initial training of my staff
• Performance is generally very strong with performance across all aspects at or above 8.0
• Although of no current impact to the USA clubs overall, the high performance on these drivers indicates that Les Mills support of new clubs is working well
Insights and Implications
Providing training and education to run Group Fitness
Getting set up and going currently has no impact on perceived value but performance is high on all aspects
NCI 8.6
NCI 8.6
NCI 7.9
NCI 8.1
33% 7.8
27% 8.3
39% 8.0
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Ensuring programs are innovative and exciting
Ensuring ongoing quality of programs
Providing programs that generate a return on
investment
Performance across all subdrivers connected with using the programs is very strong
Using the programs
Using the programs CVM Performance(1)
Providing updated programs on a timely basis
Providing programs and training to recruit and retain the
best instructors
• Customers rated performance of the programs as very high at 8.6
• Performance is strong across all subdrivers• Of particular note is that clubs rate the programs highly
as generating a return on investment which is likely to support the better performance on prices and costs
• Although still high, performance on providing programs and training to recruit and retain the best instructors is slightly lower
Insights and Implications
NCI 8.4
40% 8.7
18% 8.6 NCI 8.3
28% 8.8
32% 7.7
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Training my instructors
Providing assistance with marketing any programs
Assisting me in keeping my staff happy and motivated
Using the services within the Les Mills system is important to US customers and although still relatively good, performance is lower than on other drivers
Using the services
Using the Services CVM Performance(1)
Assisting me with measuring the success of my programs
Providing certification of my instructors
• In general Les Mills performance in respect of the services associated with the programs is perceived to be less than performance on the programs themselves
• Most importance is placed on training the instructors, followed by assisting with measurement of the success of the programs and providing instructor certification
• All other subdrivers currently have no impact• Although still high performance on these areas is
relatively lower and improvement initiatives should be focused on training and assisting the measurement of the success of the program
Insights and Implications
NCI 7.5
44% 7.2
27% 7.5 NCI 7.1
32% 7.1
24% 7.9
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Available when I need them
Committed to my business
Provide me with information when I need
United States performs well on account management which suggests the “club coach” system is working well
Account management
Account Management CVM Performance(1)
Assist me in sorting out issues related to my programs
Respect me as a valued customer
• All areas of account management are currently performing well and generally exceed other markets across most subdrivers
• In particular, compared to other markets, the USA agencies perform well on proactive content
• Performance on this driver and other drivers suggests that the “club coach” system is working well and should be considered for introduction to other markets
Insights and Implications
Proactively contacting me to add value to my business
USA
NCI 7.7
24% 7.7
NCI 7.8
30% 8.1
24% 8.0
25% 8.2
27% 7.6
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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The bills I receive are simple to understand
The bills I receive are accurate
There is a convenient payment system
As in other markets billing is a strength with the USA agents on all aspects
Billing
Billing CVM Performance(1)
Ensuring confidentiality of financial arrangement
There are fair payment terms
• The USA agents perform extremely well in all aspects of billing
• Although unlikely to confer any significant competitive advantage it is an important hygiene factor where non performance could impact club retention
Insights and Implications
24% 8.1
12% 8.4
26% 8.4 33% 8.5
NCI 8.7
32% 8.5
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Financial Costs
Non Financial Costs
Prices and costs performs very well compared to all other countries, which is likely to be related to the high rates of the programs for generating a return on investment
Prices and Costs
• Prices and costs are currently rated at 7.4, significantly ahead of the global average
• Perceived value is driven by both financial and non-financial
• Although performing well compared to other countries, perceptions of financial costs are still well behind those for non-financial costs
Insights and ImplicationsPrices and Costs CVM Performance(1)
49% 6.7
63% 7.4
51% 7.7
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Costs of setting up the program such as marketing
and training
Licence Fee
Costs to use the program eg music, video, headsets, uniforms, training etc
All aspects of financial costs have a large impact on overall perceived value with performance being relatively good, compared to other countries, across all factors
Financial Costs
• All aspects of financial costs impact on customers views of overall perceived value
• Performance across all factors is relatively good compared to other markets
• To improve performance within the US market on price and costs Les Mills should look to identify areas in operational costs that can be reduced without impacting EBIT
• In addition a strategy of trying to move focus from price onto the qualities of the program through developing and promoting tools to measure the success of the program and use of marketing should also improve overall perceived value
Insights and ImplicationsFinancial Costs CVM Performance(1)
31% 6.5
49% 6.7 24% 6.9
45% 6.6
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Time and effort in operating the program
Time and effort involved in setting up the program
Managing the resistance from staff eg instructors
In general customers perceive performance of the US operation to be good in respect of non financial costs, although improving the convenience of workshops should be investigated
Non Financial Costs
Overall Non Financial Costs CVM Performance(1)
Convenience of workshops
• Perceptions of performance in respect of non financial costs account for a large portion of overall perceived value
• The US operations performance is perceived to be good across all factors except convenience of workshops
• Given the relative impact of this driver it is worth investigating with customers what aspects of workshops (timing or location) can be improved and determining whether those issues can be improved without undermining program quality or profitability
Insights and Implications
37% 7.6
17% 7.7
51% 7.7
24% 7.4
21% 6.8
USA
Note: (1) Sample size n = 151
Process
xx% x.x
Key:
Impact Weight
2007 CVM Score
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Competition and Retention Analysis
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Surprisingly only 19% of customers perceived branded programs to be the main competition for Les Mills in the USA
Customers Views on the Main Competition for Les Mills programs(1)(2)
48%
6%
19%
27%
Freestyle
TrainingOrganisation
Other BrandedProgramme
NoCompetition
USA
Note: (1) Sample size n = 145
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Where competition does exist in the US market, Les Mills programs outperform it on all aspects of customer value drivers leaving only 3% of the customer base at risk
Customers Views of Les Mills programs Main Competition(1)(2)
Products and Services
Image and Reputation
Prices and Costs
Perceived Value of Competitors Products
to Clubs
Notes: (1) Excludes responses that say there are “no competitors”; (2) Sample size n = 151; (3) Customers who rated 8 to 10 on a scale of 1 to 10 where 1 = ‘not likely” and 10 = “highly likely”; (4) Sample size n = 151
143
139130.0
106Process
x.x
Key:
2007 RVS Score
RVS calculated as
Les Mills Score x 100
Competitors Score 1
USA
0
10
20
30
40
50
60
70
80
4 5 6 7 8 9 10
Likelihood to Reduce Usage of Les Mills programs in the Next 12 Months(3)(4)
Overall Perceived ValueP
rop
ort
ion
Exp
ecti
ng
to
Dec
reas
e N
um
ber
of
Les
Mill
s p
rog
ram
s U
sed
in N
ext
12 M
on
ths
3% of customer base at risk
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Key Decision Criteria Performance
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As in other markets it is the programs contribution to attracting and retaining members, together with the image and quality of the programs which is most important to buyers, and performance is rated highly on all factors
• Promotion to new clients should centre around how the programs generate a return on investment for the club and this needs to be reinforced once the club has purchased the programs so as to remove focus from price
• This promotion will be best achieved through direct contact, using case studies and selling tools
• Marketing of the programs to raise awareness of the programs should also focus on the programs themselves
• The training and certification of instructors is important to clubs considering purchasing Les Mills programs which is different to the other markets but which is also an area of strength within the USA
Price ranks sixth with an 8% weighting
Insights and Implications
USA